Shares of VNET Group (NASDAQ: VNET) plunged 6.64% in pre-market trading on Thursday after the Chinese internet data center services provider reported a surprise loss for the second quarter of 2025 and maintained a cautious full-year outlook, raising concerns about its future growth prospects.

VNET reported a net loss attributable to the company of RMB11.9 million ($1.7 million) for Q2, compared to a net income of RMB63.7 million in the same period last year. This translated to a loss of RMB0.01 ($0.001) per diluted share, missing analyst expectations of RMB0.01 profit per share.

Despite the bottom-line miss, VNET's total net revenues increased by 22.1% year-over-year to RMB2.43 billion ($339.8 million), driven by strong growth in its wholesale IDC business. Wholesale revenues surged 112.5% to RMB854.1 million, while retail revenues remained relatively stable at RMB958.7 million.

Ju Ma, VNET's Rotating President, commented on the results: "We delivered strong second quarter results thanks to continued effective strategic execution. Our wholesale IDC business continued to grow rapidly, driven by our wholesale data centers' fast move-in pace."

However, investors appeared concerned about several factors:

1. The company maintained its full-year 2025 revenue guidance of RMB9.15-9.35 billion, representing 11-13% year-over-year growth. This outlook was viewed as conservative by some analysts given the strong first-half performance.

2. VNET's net debt to trailing twelve months adjusted EBITDA ratio stood at 5.3, raising questions about its financial leverage as it continues to invest heavily in expanding data center capacity.

3. Potential headwinds from AI chip supply constraints could impact customer demand. When asked about this issue, Ju Ma stated, "We will closely follow companies like NVIDIA's chips and also the domestic chips. The expectation will be very clear very soon."

The market's reaction suggests investors are reassessing VNET's valuation in light of the unexpected loss and uncertainties surrounding its growth outlook, despite management's optimistic stance on AI-driven opportunities in the data center market. As VNET continues to execute its ambitious expansion plans, the company's ability to translate top-line growth into consistent profitability will likely remain a key focus for investors in the coming quarters.